Hermes has raised its full year sales outlook after reporting a rise in first half net profit boosted by Chinese demand.

The French luxury brand posted a consolidated net profit of €335 million (US$421.4 million) compared with €291 million (US$366 million) in the first half of 2011. After adjustment of the increase in gross capital gain (€29.5 million) realised on the sale of the stake in the Jean-Paul Gaultier in the first half of 2011, net income increased 28 per cent.

Hermes, which is 22.3 per cent owned by LVMH, generated 47 per cent of sales from Asia in the second quarter, 35 per cent from Europe and 16 per cent from the US.

Upbeat about the results, Hermes forecasted its full year sales will rise 12 per cent at constant rates from 10 per cent previously.

According to business consulting firm McKinsey & Company, sales of discretionary goods in China will continue to grow at a compound annual rate of 13.4 per cent through 2020 as Chinese consumers become more affluent.

While other brands’ performances were depressed by China’s slowdown, CEO Patrick Thomas said the Chinese market signs no slowing down for the brand.

“The trend for July and August is in line with the beginning of the year,” he said.

In the second half, Hermes will continue its strategy based on the development of the distribution network, increasing its production capacity and security of supply.

Hermes currently has 340 stores worlwide and plans to grow to 600 or 700 in five years.

GB